Jim Koch

Jim Koch (bottom left) with his Outward Bound team in the mid-1970s. | Photo courtesy of Jim Koch

Background:

Jim Koch is the chairman and co-founder of The Boston Beer Company, purveyor of Samuel Adams beers and one of the most widely recognized craft brewers in the United States.

The Mistake:

In my 20s, I was a mountaineering instructor with Outward Bound. Back then the courses were 28 days in the wilderness, and so you would get your supplies and then go into the wilderness for 28 days. My last course was in the interior of British Columbia.

At the beginning of the course you would supply people with food and fuel and so forth but they'd also get a certain amount of string—there was this stuff called Alpine cord. You would use it to lash things to your pack, to fix things, and I noticed that when I would give them plenty of string, by the end of the course they wouldn't have enough, even though I'd given them a more than adequate amount.

What I realized is that when they started with plenty of it, they would cut it up into little pieces that weren't that useful, they'd lose it and they never really learned to be efficient with it. They didn't learn how to put up a tarp with a minimum amount of string because they always had plenty. So by the end of the course, they didn't have enough!

So then I went the other way and I didn't give them enough string. Lo and behold when they didn't have enough they learned to use it much more efficiently, they were much more frugal with it, and by the end of the course they had plenty.

Today when I do budgets, I use the string theory.

The Lesson:

There's a business lesson from that: culture and values can substitute for money and resources. ... particularly in a small company, the strength of your culture and your values can overcome [competitors that] have abundant resources.

Today when I do budgets, I use the string theory. “I know this is what you think you need, but here is what you're going to have. And I'm going to rely on your ingenuity and smarts to make do with an amount that our competitors would think was inadequate.”

When I started we did without an office. We were only two of us, so if we had to have a meeting we did it at a bar. Those were our customers. I knew where every pay phone was in Boston and I knew where the ones were that were quiet, sheltered, and the ones that you wanted to use in the winter. So we didn't have an office for a whole year.

Everybody thinks, “How do you have a company and not have an office? Or a phone and somebody to answer it?” We had an answering service, we called into it, we used pay phones. And it also meant we never sat around in an office—we went to where our customers were. So that was a different set of values and a different culture, but it made us a better, stronger, more effective company as a result.

It's still part of our culture. Even now our sales people don't have an office. I mean, they just sort of spend their day with customers. Nobody sits in an office, because I remind people you can't sell beer to your desk.